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ProSource Ponders IoT Pricing Puzzle At Spring Meeting

Defining the IoT market, and figuring out how to make money in it, was near the top of the agenda at ProSource’s annual Spring Meeting this month.

The event, held in Dana Point, Calif., by the $4.5 billion specialty tech buying group, brought together some 300 dealers, custom integrators and vendors, including members of ProSource’s new commercial integration partner, CI Edge.

Top of mind for members was getting a handle on the IoT business.

“People are looking for guidance,” explained ProSource president/CEO Dave Workman. “The pricing is way below where integrators like to play.”

To figure out a pathway, the group created a special committee comprised of ProSource members, vendors and outside consultants, which held the first of what is likely to be an going series of gatherings. Their goals, said Workman: to first identify the scope of IoT products and services for the do-it-for-you channel, and then develop an alternative approach to the burgeoning business that will make it more profitable.

See: For Custom Integrators, An Embarrassment of Riches

In the meantime, ProSource’s CI members appear to be doing quite well, thank you. “Business is healthy for them,” Workman said, with that member class up 20 percent last year. “They’re navigating their way through the installation business.”

Retail, however, is another story. “We’ve struggled along with the general retail trends” — including declining floor traffic — “but are doing a little better than most,” he noted, thanks to a rising average ticket size.

“They’re making more with the traffic they’re getting,” Workman said of his brick-and-mortar dealers, who have also become proficient at e-commerce.

“There continues to be a place where retail plays in the market, but for the self-guided customer you can’t ignore the Internet,” he observed. “There’s strength in balancing brick-and-click.”

On the product front, CI category sales grew 10 to 20 percent last year and audio was up 10 percent. In a state of the industry address, Workman noted that average selling prices (ASPs) are stable in audio, and that such new technologies as 4K switching and Dolby Atmos, and renewed interest in retro products like turntables, will keep the category healthy.

However, the introduction of lower-price platforms by Google and others will take a bite out of the wireless multi-room category, requiring members to work hard to find growth.

TV too was “a little bit of a struggle” with tepid demand for 4K, a product class that represents over 70 percent of ProSource’s panel sales.

“We’re not seeing enough of a unit-velocity increase to offset the decline in ASPs,” Workman observed, although he remains optimistic that consumer craving for Ultra HD displays will increase in the second half.

However, ProSource does particularly well in 4K OLED, which should pick up as inventory constraints ease, and the market is heating up for high-performance projectors, which can now be had for under $10,000. As for 4K Blu-ray, “We can’t keep them in stock.”

Taken together, “The high-end theater business is making a nice return,” Workman noted.

Another goal of the Spring Meeting was a best-practices exchange, which hit new heights that week as A/V dealers, large and small custom installers, CI Edge’s commercial integrators, big-box associate members from the NATM Buying Corp., and attendees from ProSource parent BrandSource crossed paths and compared notes.

The key takeaway? “There are lots of opportunities in our core categories to grow your business profitably,” Workman said.